It wasn't supposed to happen. Almost two years ago, many financial institutions began replacing older magnetic stripe credit and debit cards with new chip-enabled cards. These new cards were expected to be more secure and reduce fraudulent card use. Yet some jurisdictions are now reporting an increase in credit and debit card fraud from skimming.
A skimmer is a small device placed in or over the card reader at an ATM, gas pump, or point-of-sale (POS) terminal at a retail checkout. The skimmer may be nearly impossible to see. As you are withdrawing cash (at an ATM) or paying for your purchase (at a gas pump or at the checkout), the skimmer may record the credit or debit card information from the magnetic stripe on the back of your card. That information can then be used to make a clone of your card that can often be used just like the real card.
Credit and debit cards with chips (a small, metallic square on the front of the card) offer better protection than those that only contain magnetic stripes. However, if the card reader requires you to insert the full length of your card, the skimmer can still steal data from the magnetic stripe on the back of your card to make a clone of your card (without the chip).
While most skimming devices steal card data by recording the data from the magnetic stripe on the back of your card, more advanced devices can capture the chip information from your card. A skimmer variation known as a shimmer can actually record the data on the chip as it is being read. A shimmer can also capture your PIN. This information can then be used to make a clone of your card.
How to Protect Yourself
- Learn how to spot a skimmer by reading illustrated guides to ATM, gas pump, and point-of-sale skimming devices.
- Check for any signs of tampering or loose parts on the card reader.
- Use credit cards instead of debit cards to reduce your risk. With a debit card, funds can quickly be withdrawn from your bank account without your knowledge. With a credit card, you will have an opportunity to dispute any fraudulent transactions before you have to pay your bill, so you will still retain access to the funds in your bank account.
- If you must use a debit card, select “credit” instead of “debit” to avoid entering your PIN.
- If you must enter a PIN, use your hand to cover your fingers while entering your PIN.
- Carefully monitor your accounts online to detect any unauthorized charges. Review your statements promptly.
- Promptly dispute any unauthorized charges. If your credit card is skimmed, you are not liable for unauthorized charges as long as you still have your credit card in your possession. With a debit card, your liability depends upon how quickly you report the loss.
Be sure to read our Consumer Guide Privacy When You Pay: Debit, Credit, Cash and More to learn more about your rights and outline the potential risks and benefits of different card types and other payment methods.